IMF Executive Board Concludes 2017 Article IV Consultation with Colombia

May 4, 2017

On May 1, 2017, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation[1] with Colombia. 

In 2016, Colombia continued a remarkably smooth adjustment to a combination of large external and domestic shocks, with economic growth outpacing regional peers and achieving further improvements in poverty and inequality. Growth moderated as investment declined and exports were constrained by weak demand from neighbor countries. A further decline in oil prices eroded fiscal revenue and contributed to peso depreciation. Inflation reached a multi-year high in July partly due to El Niño and other supply shocks, but has moderated since. Despite declining exports, the current account deficit narrowed faster than expected as imports contracted, with FDI and portfolio inflows providing ample financing. The central bank continued to increase rates early in the year to anchor inflation expectations, but lowered them in recent months as inflation pressures subsided. The central government complied with the fiscal rule deficit target through primary expenditure cuts and some improvements in tax administration while protecting priority social and infrastructure spending. 

Colombia faces a favorable outlook underpinned by the peace agreement and the structural tax reform together with the authorities’ infrastructure agenda. Economic activity will rebound slightly this year as investment will strengthen boosted by reduced corporate taxation and confidence stemming from the peace agreement. Non-traditional exports are gaining steam in part due to ongoing efforts to reduce trade barriers and this will contribute to bring the current account deficit to its equilibrium level. Medium-term growth will be driven by economic diversification away from oil which will benefit from the infrastructure agenda and the peace agreement that will improve competitiveness and regional development. Risks to this outlook are to the downside with the main near-term risk stemming from the still large (but moderating) external financing needs. Domestically, while the banking system appears sound and broadly resilient to shocks, some pockets of corporate vulnerability have emerged. On the upside, a faster than expected implementation of the peace agreement could strengthen medium-term growth even more.  

Executive Board Assessment[2] 

Executive Directors commended the authorities for their strong policy framework and timely policy actions, which supported Colombia’s smooth adjustment to a combination of external and domestic shocks. Despite the growth slowdown, the country achieved social gains with improvements in poverty and inequality. While the medium-term outlook is favorable, downside risks remain including possible financial volatility amid the country’s relatively high gross external financing needs. 

Directors noted that Colombia’s favorable medium-term outlook will be helped by the implementation of the peace agreement and the structural reform agenda. After a decade of favorable demographics and a commodity-related investment boom, growth prospects will depend in part on finding new engines of growth. The peace agreement stands to improve regional development and foster social inclusion; while the infrastructure agenda will help reduce important infrastructure gaps and improve productivity. Directors welcomed ongoing efforts to reduce trade barriers to facilitate export diversification, and encouraged further measures to improve the business environment and develop human capital. 

Directors welcomed the structural tax reform approved last year, which will help finance key social and infrastructure programs while adhering to the fiscal rule. They concurred that reduced corporate taxation and the overall simplification of the tax system will improve competitiveness. Directors also noted that continued efforts on tax administration will be essential to achieve the target revenue yield. They welcomed the authorities’ efforts to finance the implementation of the peace agreement, while noting that the mild negative fiscal impulse is appropriate and will help place the public debt-to-GDP ratio firmly on a downward path. 

Directors welcomed the central bank’s focus on guiding inflation expectations back to the target range while protecting the external adjustment. Timely policy decisions helped offset inflationary pressures last year and supported a welcome moderation in domestic demand. Directors noted that there is scope to ease the policy stance this year depending on the evolution of inflation expectations, but emphasized that the path of policy rate cuts should remain data-dependent. They considered that the flexible exchange rate regime has served the country well and should remain the first line of defense against global shocks, and the Flexible Credit Line with the Fund represents an additional buffer. 

Directors were encouraged by the authorities’ plans to further strengthen financial sector supervision and regulation. While the strength of the financial system has withstood the economic slowdown in recent years, some pockets of vulnerabilities have emerged. In this regard, they called for continued monitoring of household and corporate balance sheets. Directors also encouraged the authorities to implement the remaining key recommendations from the FSAP. They agreed that the adoption of Basel III capital standards and the approval of the Conglomerates Law will provide additional tools to manage corporate and overseas risks. Adopting international standards on loan classification and restructuring practices will further enhance the resilience of the financial system.

Colombia: Selected Economic Indicators










(Annual percentage changes, unless otherwise indicated)





National Income and Prices




Real GDP




Consumer price index (period average)




Consumer price index (end of period)




GDP deflator




Terms of trade (deterioration -)




Real effective exchange rate (depreciation -)





                      (In percent of GDP, unless otherwise indicated)

Public finances




Central government balance




Combined public sector




Public debt 1/




External Sector




Current account (deficit -)




External debt




   Of which: Public sector




GIR in percent of short-term debt




Savings and Investment




Gross domestic investment




Gross national saving





        (12-month percentage changes, unless otherwise indicated)





Money and credit




Broad money (M2)




Credit to the private sector




Interest rate (90-day time deposits; percent per year)









Sources: Colombian authorities; and IMF staff estimates and projections.

1/ Includes Ecopetrol and Banco de la Republica's outstanding external debt.

[1] Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.

[2] At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here:

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